1. What is FUTA Tax?

The Federal Unemployment Tax Act (FUTA) tax is a payroll tax paid by employers to fund state workforce agencies. Employers pay this tax separately from state unemployment taxes.

2. How FUTA Tax is Calculated

The standard FUTA calculation formula:

Where:

• Taxable Wages — Wages paid to employees subject to FUTA tax
• Wage Base — Maximum amount of wages subject to FUTA tax ($7,000 in 2024)
• 6% — Standard FUTA tax rate

Note: Many employers qualify for a 5.4% credit, reducing their effective FUTA rate to 0.6%.

3. FUTA Tax Rates and Wage Base

2024 Details:

• Standard rate: 6% of first $7,000 paid to each employee annually
• Effective rate after credit: 0.6% for most employers
• Wage base remains $7,000 per employee for 2024

4. Using the Calculator

Instructions: Enter the total taxable wages paid and the wage base ($7,000 for 2024). The calculator will determine the FUTA tax liability.

5. Frequently Asked Questions (FAQ)

Q1: Who pays FUTA tax?
A: Employers pay FUTA tax; it's not deducted from employee wages.

Q2: What wages are subject to FUTA?
A: First $7,000 paid to each employee annually (with some exemptions).

Q3: When is FUTA tax due?
A: Quarterly if liability exceeds $500; otherwise annually with Form 940.

Q4: Can the FUTA wage base change?
A: Yes, but it's been $7,000 since 1983. Congress would need to change it.

Q5: What's the difference between FUTA and SUTA?
A: FUTA is federal; SUTA is state unemployment tax with varying rates and wage bases.